U.S. Dollar Pulls Back As Retail Sales Miss Estimates: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Tests New Lows

U.S. Dollar Index is losing ground as traders react to the disappointing Retail Sales report. The report indicated that Retail Sales were unchanged in December, compared to analyst forecast of +0.4%.

Retail Sales Ex Autos were also unchanged, compared to analyst consensus of +0.3%. Analysts expect that Retail Sales numbers for January could be weak due to cold weather.

Today, traders also had a chance to take a look at the Business Inventories report for November. The report showed that Business Inventories increased by +0.1%, while analysts expected that they would grow by +0.2%.

The surprising weakness of Retail Sales served as a negative catalyst for the U.S. dollar, although it is not clear whether Fed is ready to cut rates because of the slowdown in consumer spending.

U.S. Dollar Index settled below the previous support at 97.10 – 97.25 and is trying to settle below the 96.75 level. In case this attempt is successful, U.S. Dollar Index will move towards the next support level, which is located in the 96.00 – 96.15 range.

EUR/USD Is Stuck Near Resistance At 1.1900 – 1.1915

EUR/USD is stuck in a tight range as traders react to economic reports from the U.S. Traders will also wait for the important Non Farm Payrolls report, which will be released tomorrow.

There are no important economic reports scheduled to be released in the EU today, so traders will stay focused on the economic data from the U.S.

EUR/USD continues its attempts to settle above the resistance level at 1.1900 – 1.1915. If EUR/USD manages to settle above the 1.1915 level, it will move towards the next resistance at 1.1985 – 1.2000. RSI is close to the overbought territory, but there is enough room to gain momentum in the near term.

GBP/USD Pulls Back From Session Highs

GBP/USD is moving lower as traders stay focused on the political drama in the UK. Prime Minister Keir Starmer survived a call to step down, and UK government bond yields pulled back.

Traders also focused on the BRC Retail Sales Monitor report for January. The report indicated that Retail Sales increased by +2.3% year-over-year, compared to analyst forecast of +1.2%.

The nearest resistance level for GBP/USD is located in the 1.3710 – 1.3725 range. A successful test of this level will push GBP/USD towards the next resistance at 1.3835 – 1.3850.

USD/CAD Tests The 1.3525 Level

USD/CAD is losing ground despite the pullback in precious metals markets. Gold declined towards the $5000 level, while silver pulled back towards $80.00. Other commodity-related currencies moved lower in today’s trading session.

Currently, USD/CAD is trying to settle below the 1.3550 level. In case this attempt is successful, USD/CAD will move towards the nearest support level, which is located near January lows at 1.3485 – 1.3500.

USD/JPY Tests Support At 154.50 – 155.00

USD/JPY suffered a strong sell-off as traders reacted to the disappointing U.S. Retail Sales report.

USD/JPY is extremely sensitive to changes in Fed policy outlook, so any signs of weakness in the U.S. economy provide support to the Japanese yen.

Interestingly, Japan’s Prime Minister Takaichi’s recent victory in snap election did not put any pressure on the Japanese currency. Takaichi is known for her ultra-dovish views on fiscal and monetary policy.

From the technical point of view, USD/JPY is trying to settle below the support level at 154.50 – 155.00. In case USD/JPY manages to settle below the 155.00 level, it will head towards the next support level at 151.50 – 152.00. Traders should note that RSI is in the oversold territory, so the risks of a rebound are increasing.

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